According to an article published by Bloomberg, San Francisco currently has the second-highest rent in the country. While this is a positive insight for landlords wanting to earn more for their rental property, it can also pose problems.
High rents can lead to late payments from your tenants as they scramble to make ends meet some months. The question is "How do you encourage your tenants to pay on time every time?".
Late fees are one way to ensure timely rental payments. Find out more about this topic here and how property management companies in San Francisco Bay can help.
What Is a Rent Late Payment Fee?
Late rent fees are charges that landlords can impose on tenants who are late paying their rent. In California, these fees aren't automatically enforceable and must meet certain legal requirements.
For instance, a late fee must equal a reasonable estimate of how much the late payment will cost the landlord. It might cover the cost of sending a notice to the tenant or paying the applicable interest on their mortgage.
The landlord must prove that they could not avoid incurring these costs.
The landlord must stipulate any terms and conditions surrounding late fees in the rental agreement. If the fee is excessive or punitive, it is unenforceable by a court. Tenants may have a defense against eviction on the grounds of unreasonable late fees.
How Much Can You Charge for Late Payment?
It's difficult to determine a fair and reasonable amount under California law. Yet, most landlords seem to settle on 5% for late rent payments in this state.
Additionally, landlords may charge an extra $25 if a tenant's check bounces, with an additional $10 charge for repeat offenders.
The most important thing to remember about late fees is to include every detail surrounding this issue in your lease agreement and explain it to your tenant before they sign.
Grace Periods and Late Fees
It's important to allow your tenant a grace period before imposing late fees.
Most states don't explicitly require this. However, you must remember that maintaining good relations with a long-term tenant is often worth more than the few extra dollars gained by a late fee.
There are many reasons why tenants may pay late. The due date may fall on a bank holiday, they may experience delays in receiving funds or they might be out of town at the time rent is due.
Setting up automated payments or an online payment portal are some ways to work around this.
Most grace periods allow three to five days for tenants to submit their rental payments without penalties. Be sure to include any grace periods in the lease agreement.
Searching for Property Management Companies in San Francisco Bay, California?
If you own a rental property in San Francisco and want to ensure it's run legally and efficiently, hiring a team of property managers is a good option for you.
An experienced property management service will take care of screening tenants, collecting rent, and imposing any necessary fees within the bounds of the law.
Get in touch with Kenny Realty, one of the leading property management companies in San Francisco Bay, California. We can assist you with every aspect of managing your investment property.
Evan has been in the real estate and property management field for 6+ years. He is experienced in working with first time home buyers, is an Accredited Buyer’s Representative (ABR®), Seller Representative Specialist® (SRS) and Seniors Real Estate Specialist®(SRES®). He also works closely with Kenny Realty owners, getting their rental properties rented as quickly as possible. Evan is responsible for monitoring rental market conditions and advising our owners on market rates. He has outstanding communication with all clients he works with, keeping everyone in the loop at all times. He is the third generation of the Kenny family to practice property management on the peninsula.